Benchmark bond yield rises to 14-month high amid crude price worries

The 10-year government bond yield was trading at 6.8173 per cent around 11 am on Monday, as compared to Friday’s close of 6.737 per cent. The yield is highest since January 14, 2025, according to the data compiled from market participants.

“Bond yields are rising in response to crude oil prices climbing above USD 110 amid escalating tensions between the US-Israel and Iran. Foreign institutional investors who were net buyers of government bonds in January and February, have also turned net sellers in March,” said Mataprasad Pandey, vice-president at Arete Capital (Choice Group).
He added that higher crude prices are not only fuelling inflation concerns but also putting pressure on India’s trade and current account balances, which is a big negative for the already depreciating rupee moving towards 94.
“These factors not only dampen expectations of a rate cut but raise the possibility of a rate hike if geopolitical tensions persist for long. As a result, increased supply relative to demand is weighing negatively on bond prices,” he added.

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The conflict in the Middle East has entered into the fourth week, which led to a sharp surge in the Brent crude oil prices in the international market, which stoked a fear of higher inflationary pressure.
Oil prices rose sharply after Iran said it would strike energy and water systems of its Gulf neighbours if US President Donald Trump followed through with a threat to hit Iran’s electricity grid in 48 hours.Brent crude oil prices are trading at USD 112.66 per barrel. It has risen nearly 50 pet cent since the conflict started late in February.

Higher crude oil prices have also put pressure on the rupee, which also dampened sentiments of traders and investors in the market.

The rupee is trading at 93.9075 against the US dollar, which was up 20 paise since previous close.